Saudi Arabia targets record oil drilling

Al Khobar, March 28, 2012

Top global oil exporter Saudi Arabia is set to use a record number of drilling rigs this year as it ramps up production, in the face of possible supply shortages due to Western sanctions on Iran.

With oil exports by Iran, Opec's second largest producer under threat, Saudi Arabia is expected to have a record 140 oil and gas rigs by the end of the year, industry sources said.

"Aramco is following an ambitious programme to add rigs to accelerate field development in oil and gas," said an industry source in Saudi Arabia. State-run Saudi Aramco declined to comment.

The number of rigs operating in the world's second largest oil producer after Russia is already back to levels seen in the early 2008 oil boom at around 130, up from 100 at the end of the third quarter last year. Most are being used for oil drilling but others are probing for gas, being used for maintenance, or drilling for water needed to reinject into oilfields to boost production.

Last year, industry sources said that Aramco planned to raise the number of drilling rigs it operates to pre-financial crisis levels of up to 135 by the second quarter of 2012. Many of the additional rigs will be allocated to Manifa, as Aramco expedited plans to bring the 900,000 barrel per day (bpd) oil field on line in two phases from 2013.

Aramco sharply reduced its rig count from 130 to 104 as the global economic crisis hit demand in 2009. Once Manifa is fully online by 2014, Aramco plans to boost production at offshore oilfields Safaniya, Zuluf, Marjan, and other onshore projects, Saudi industry sources said. Aramco is already implementing a project to maintain maximum production capacity at its huge Safaniya offshore oilfield.

Plans to re-open the country's first oilfield, Dammam, which could add an extra 40,000 bpd are still under study. Dammam still accounts for 0.5 billion barrels of Aramco's proven reserves, Aramco's CEO Khalid al-Falih has said.

"The re-opening of Dammam is now under study and a decision is expected to be reached soon," said an industry source in the kingdom. "For the time being Saudi has sufficient resources to bring online with ease."

Oil Minister Ali Al-Naimi said last week the kingdom had been meeting all its customers' needs and was prepared to raise output from current levels of around 9.9 million bpd to full capacity of 12.5 million bpd, if needed.

But Al-Naimi said he expected output next month to remain steady and that demand for Saudi crude was unlikely to ever reach Saudi Arabia's existing 12.5 million bpd capacity because of rising production in other countries.

Aramco chief executive Khalid Al-Falih said last November that plans to increase the kingdom's production capacity to 15 million bpd had been put on hold because it already had enough spare capacity to meet expected demand.

"There is no doubt that Saudi Arabia is doing everything it can to increase its production for current and future demand," said Kamel Al Harami, an independent Kuwaiti analyst. "They want to be the world's leader in oil production and are taking steps to ensure that they have this confidence from global buyers."

Oil fields need to be repeatedly drilled to maintain healthy production levels.-Reuters